A short term decline or something more alarming?

18th July 2012

FTSE 100 falls to test 5595…

It may have taken longer than expected, but the FTSE 100 has finally managed to move away from the 5700 upside target. At the moment, the index has tested the 5595 support level, the previous resistance level. After dipping below 5660, there is the potential for further falls down to 5430 in the weeks to come. To try and keep any bearish scenarios at bay, the index needs to promptly rise back above 5700. However, there is cause for optimism as the market is yet to signal a bearish indicator due to a lack of red momentum bars. Until this happens, the decline may actually be corrective, but next week will reveal more.

Dow Jones has to break 12450…

Across the Atlantic, the Dow Jones fell below the 12700 mark, triggering entry into bear market territory. The red bars indicate that short-term momentum shows a bearish trend. If the index remains lower than 12835, then traders may expect further falls. There's a possibility that the Dow Jones could fall below 12450, ensuring that the market remains bearish going into next week. A reversal in this trend or a close above the 12835 mark likely puts an end to any declines, however if the index wasn't to go down this route, then any rallies could be brief and sellers may look to take complete control of the market for the next week.

Gold showing signs of breaking away in the next week…

Despite being range-bound, Gold has shown a few signs of weakness. Remaining below $1,607, the bearish target price of $1,547 is tantalisingly close to being met. Should Gold remain weak in the near future, there's a possibility that the lower side could be tested, opening the pathway for the metal to potentially reach $1,485 in the near future.

However, it's important to be cautious with the precious metal whilst traders are also looking for any move above $1,607. Although this scenario won't indicate any signs of likely bullishness, it could show a move sideways. A breakaway in Gold's value is needed to show clear signs of any direction. Until that happens, the metal is expected to remain range-bound.